Does Price Fixing Destroy Liberty?/Annotated/The Aftermath

by George Howard Earle, Jr.

ADDENDA.

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CHAPTER IX.

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The Aftermath.

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"They who are intrusted to judge ought to be free from vexation that they may determine without fear. The law requires courage in a Judge and, therefore, provides security for the support of that courage."

—Chief Justice North—afterwards Lord Chancellor—in Barnardiston vs. Soame (1674), 6 How. St. Tr. 1096.

And now that we have the inevitable aftermath; now that business men, farmers, all are seeking aid from the Government because of ruinously low prices; now that we see panic in Japan, moratoriums in Boston, Cuba asking and even getting countenance from our Government, that there may be resources to carry it through; business men on all sides seeking and getting extensions; men by the thousands losing their occupations, it is being asked: "How was it possible to predict accurately the inevitability of all this, in the foregoing pages, written at a time when everything was at the highest, and the public convinced that it was there to stay forever?"

It is regrettable, however, that credit cannot be accepted. The task was no more difficult than predicting that the sun will rise to-morrow. Even an elementary inquiry as to economic law at once establishes that all such matters are regulated by the unvarying perpetual law which, like all of the laws of Perfect Wisdom, have and always will produce like results from like causes.

It should never be forgotten that, as has been well said:

"Natural justice is the conformity of human laws and actions to natural order, and this collection of physical and moral laws existed before any positive institutions among men. And while their observance produces the highest degree of prosperity and well-being among men, the non-observance or transgression of them is the cause of the extensive physical evils which afflict mankind. If such a natural law exists, our intelligence is capable of understanding it; for, if not, it would be useless, and the sagacity of the Creator would be at fault. As, therefore, these laws are instituted by the Supreme Being, all men and all states ought to be governed by them. They are immutable and irrefragible, and the best possible laws: therefore necessarily the basis of the most perfect government, and the fundamental rule of all positive laws, which are only for the purpose of upholding natural order, evidently the most advantageous for the human race. * * * How could man understand the necessity of labor to obey the irresistible instinct of his preservation and well-being, without conceiving at the same time that the instrument of labor, the physical and intellectual qualities with which he is endowed by nature, belongs to him exclusively, without perceiving that he is master and the absolute proprietor of his person, that he is born and should remain free?

But the idea of Liberty cannot spring up in the mind without associating with it that of property, in the absence of which the first would only represent an illusory right, without an object. The freedom the individual has of acquiring useful things by labor supposes necessarily that of preserving them, of enjoying them, and of disposing of them without reserve. * * * Thus Liberty conceived in this manner becomes property. * * * The Physiocrats, then, placed absolute freedom, or property—as the fundamental right of man—freedom of Person, freedom of Opinion, and freedom of Contract, or Exchange; and the violation of these as contrary to the law of Providence, and therefore the cause of all evil to man."^[1]

Another great writer says:

"Natural laws which political economy discovers, whether we call them laws of production or laws of distribution, have the same proof, the same sanction and the same constancy as the physical laws. Human laws change, but the natural laws remain, the same yesterday, to-day and to-morrow, world without end. * * * And so it has been with attempts of human law to fix and regulate prices, which involve the same great laws of distribution in combined forms. Human law is always potent to do as mankind will with what has been produced but it cannot directly affect distribution. That it can reach only through production. * * * If we look over the legislation by which the ruling portion of our communities have striven to affect the distribution of wealth, we shall find that (as if conscious of its hopelessness) they have seldom if ever tried directly to affect the distribution of wealth; but have tried to affect distribution indirectly through production."

It is to be remembered that Mr. Mill was ultimately driven to the same conclusion, and, accordingly, Governor Coolidge was but announcing a long realized fundamental truth when he advised the Legislature of Massachusetts that its function was to "discover" laws. But, whilst human laws cannot repeal economic laws, they are constantly subject to reversal by them—often after infinite harm has been done.

If our suffering from such errors is less than that of other people, it is doubtless because the Supreme Court has always had the power and will to interpose the shield of the Constitution between the ephemeral follies prompted by temporary difficulties, and remedies that endanger freedom. It follows that the preservation of these "discovered" laws is really the great constitutional service of that greatest of Courts. It is hoped, therefore, that a further brief discussion of a few of the fundamental "discovered" and, therefore, constitutional laws, applying to the Lever Act, and founded on natural justice, may be pardoned.

For example, one for which we have both Divine and human authority is that as "no man can serve two masters," and, therefore, be a proper judge in his own case, an Act must be fundamentally wrong and unconstitutional, that, in real substance, first constitutes him the judge in the fixing of the prices of his property; and then appoints the judges to try him, jurors who are also acting as judges in their own cases with diametrically conflicting interests. Lord Chief Justice Hobart, in Day vs. Savage,^[2] long since, though not buttressed by our Constitution, gave as an illustration for acts of Parliament void for violation of "natural equity," those making men judges in their own cases, saying: "Even an act of Parliament made against natural equity, as to make a man judge in his own case, is void in itself, for jura naturae sunt immobilia, and leges legum." And Lord Blackburn, speaking for all the attending Judges, again says: "It is contrary to the general rule of law, not only in this country, but in every other, to make a man a judge in his own case."

Perhaps the most important of these "discovered" laws is that those appointed, or forced by law to exercise judgment, or a use of discretion, must be protected from the consequences of the risks of the errors necessarily involved.

This law was naturally among the earliest to be "discovered," and its violation as naturally and reasonably involves the greatest degree of resentment and distress. It is in the writer's opinion the most important in the whole discussion. It, therefore, becomes of prime importance clearly to ascertain its reason, because, as Lord Coke, so long ago and so well said:^[3] "The law is unknown to him that knoweth not the reason thereof, and that the known certainty of the law is the safety of all"; and also because the law consists not in particular instances and precedents, but in the reason of the law."^[4]

From the earliest time, and in all civilized nations, the higher Judiciary have always given themselves complete immunity from their errors in judging. Constantly having to use judgment, they inevitably at once ascertained the impossibility of satisfactorily performing this higher function in an atmosphere of constant annoyance, anxiety and fear; and it was for the public benefit—not from timidity or favor to themselves—that they declared this never departed-from exemption. But since "reason is the life of the law," and its principles must necessarily be applied under the maxim: "Ubi eadem Ratio ibi idem Jus,"^[5] the principle has been steadily, and from necessity of justice, wider and wider applied. "Like reasoning making like law."

It is not necessary to examine a multitude of cases, as the Supreme Court itself has thoroughly established this proposition in more than one decision unanimously arrived at. Reference to one of them, Spalding vs. Vilas,^[6] must be sufficient to conclude this question. In that case the Postmaster General, not a Judge at all, reached and expressed an opinion in the course of his duty. He was under no necessity of such expression, but he did act in the performance of a duty entrusted to him. Alleged damage followed, and suit was brought against him. The Supreme Court, after examining the general cases applying to the Judiciary, inevitably reached the unanimous conclusion that for like reasons he must also be immune from suit, saying:

"The allegation of malicious or corrupt motives could always be made, and if the motives could be inquired into Judges would be subjected to the same vexatious litigation upon such allegations, whether the motives had or had not any real existence. * * * The doctrine * * * has a deep root in the common law. It is to be found in the earliest judicial records, and it has been steadily maintained by an undisputed current of decisions. * * * It is essential in all Courts that the Judges who are appointed to administer the law should be permitted to administer it under the protection of the law, independently and freely, without favor and without fear. * * * How could a Judge so exercise his office if he were in daily and hourly fear of an action being brought against him, and having the question submitted to a jury * * *  ? Does an action lie against a man for maliciously doing his duty? I am of opinion that it does not * * * No Judge, no jury, no witness * * * could discharge his duty freely if not protected by a positive rule of law from being harassed by actions * * * and * * * that the position of the defendant manifestly required a like protection to be extended to him and to all other officers in the same position." "There is," Mellor, J., said, "little doubt that the reasons which justify the immunity in the one case do in great measure extend to the other."

Nowhere has this been better stated than by Lord Chancellor North, centuries ago, in Barnardiston vs. Soame:^[7] "They who are intrusted to judge ought to be free from vexation that they may determine without fear."

As the Courts decide upon the real substance of things, let us inquire what this Act requires.

It has, again and again, been determined that the fixing of charges, etc., is a purely legislative function, to be exercised by the Legislature or its properly denominated substitutes. It, of course, follows, from the decisions already referred to, that both are immune from action or indictment. The Lever Act, departing from established custom, appoints each seller of certain commodities the price determining authority. His judgement, whatever it may be, must control the primary act. But he, unlike the others, has no volition whatever, for he must decide under penalty of losing not only his means of livelihood, but even his constitutional inalienable "right of pursuit."

But this is not all by any means. As the Supreme Court has itself pointed out, the legislative function forced upon him is perhaps the most difficult in all the law, most liable to error, most requiring of aid from every source. In the Knoxville case,^[8] it is expressly termed "a delicate and dangerous function"; and if the International Harvester case^[9] be understood, where a continuing business is involved, its performance is beyond the powers of the human mind. And, yet, it is just in this case alone that every citizen of the United States is to be forced to judge under the fear of ruin, fine and imprisonment. Can that be a possibility under the laws of any highly civilized people, protected by the Constitution?

As is illustrated by the latest application of the underlying principle in the able opinions of Justices McReynolds and Brandeis in the recent cases of Oklahoma vs. Love;^[10] and Ohio vs. Ben Avon Borough,^[11] where it was so clearly held that, in such cases, men cannot be punished for forced exercise of their judgments, unless and until they have a further and full opportunity of guidance from independent and trained jurists, and acted in defiance of it!

The riddle of the wrong construction of the Lever Act is solved, when it is once clearly understood that its real connection is that millions of men are to be forced to judge at the penalty for failure to do so of a nullification of their constitutional "right of pursuit"; and that, having been thus forced, the whole power of the United States is to be used to persuade twelve other men—i. e., a jury—that the judgment citizens were thus forced to use did not accord with that of the latter; and, having done so, to ruin the former by fine and imprisonment, because of this ex post facto decision. And, at the best, even if these twelve men should guess with the sellers, thereby to subject these business men to endless anxiety, harassment and fear. As Lord Justice Scrutton says in the latest case upon this subject:^[12] "Success in every action is no consolation to a defendant, * * * and hampered by fear of such an action in the performance of his judicial duty. The same reason appears to me to apply to the functions of those administering the lunacy laws."

It must be understood that under this interpretation the guessing has to be done after a removal of all the landmarks and guides, such as market price and the price resulting from freedom, that men have been instructed and accustomed to follow for centuries.

It is believed that there is no parallel for this in all history, except in the case of the daughter of Orthus, but that gives nothing but encouragement, for, from the dawn of higher civilization, she has always been held to be a monster, whose self-destruction became inevitable upon the solving of her riddle, and the certainty that an Oedipus must appear to remedy the cruelties involved in such an interpretation. Naturally she has been inevitably considered the emblem of Death! In the present case, of course, of "Trade."

There does not appear to be anywhere a clear comprehension of what "value" means, or consists, notwithstanding the perfectly clear and scientific statement of it by Mr. Justice Holmes in the International Harvester case;^[13] and, though it can be found in the works of other able economists, one of whom well says:

"What we deem the point of real value, or actual equivalence, we speak of as market value, from the old idea of the market or meeting place of those who wish to make exchanges, where competition or the higgling of the market brings out the highest bidding or the lowest offering in transactions of exchange. And when we wish to ascertain the exact value of a thing we offer it at auction or in some other way submit it to competitive offers. * * * Value is thus an expression which, when used in its proper economic sense of value in exchange, has no direct relation to any intrinsic quality of external things, but only to man's desires. * * * For the point of equivalence or equation that we express or assume when we speak of the value of a thing is a point where the desire to obtain i one mind so counterbalances in its effect on action the desire to retain in another mind that the thing itself may pass in exchange from the possession of one man to the possession of another with mutual willingness. Now this fact that the perception of value springs from a feeling of man, and has not at bottom any relation to the external world * * * is what lies at the bottom of grotesque confusions. * * * Value has of course its origin in the feeling of desire. Thus it is that there is no measure of value among men save competition or the higgling of the market, a matter that might be worth the consideration of those amiable reformers who so lightly propose to abolish competition. * * * The law of competition is one of these natural laws, without an understanding of which we cannot fully understand that Intelligence to which we must refer the origin and existence of the world has provided that the advance of mankind in civilization should be an advance towards the general enjoyment of literally boundless wealth. * * * Competition is indeed the life of trade, in a deeper sense than that it is a mere facilitator of trade. It is the life of trade in the sense that its spirit or impulse is the spirit of impulse of trade or exchange."

From every point of view, from every source of knowledge, the improper interpretation of the Lever Act; the view that it was intended to draw the very life blood of competition simply requires a belief that an Act passed to secure adequate supplies had as its ultimate purpose such a restraining of trade itself as has never been attempted, and that would inevitably reduce all supplies to a minimum.

Another instance perfectly clarifies the distinction between the Nash^[14] and the International Harvester^[15] cases, that has caused such perplexity to many outside of the Supreme Court, though not within it. The "discovered" rule there involved is that men have an inherent right of adequate opportunity for self-defense; this imperatively requires a sufficient certainty of knowledge as to that which they must defend themselves against. They must be given a clear standard of conduct to follow, if they are to be justly punished for not following it. No one seems to dispute that. But what has caused the confusion is overlooking that the "standard" need not be in any particular statute. If it be established either by Common Law or a common knowledge of those involved, or so that the ordinary man should be familiar with it, it is amply and justly sufficient. But he must or should have actual knowledge from that already determined, and not from surmise or guess or conclusions upon which there be no fixed standard and different results must necessarily be reached by different minds differently circumstanced.

All this has been so long, so frequently, and so justly, and continuously announced, that one feels almost helpless at having to discuss it again. Over a century ago Mr. Justice Washington said in the Sharp case,^[16] later confirmed by the Supreme Court of the United States itself: "Laws which create crime ought to be so explicit in themselves, or by reference to some other standard that all men subject to their penalties may know what act it is their duty to avoid." See, too, the Brewer case,^[17] affirming this. And this is exactly the basis of the decision in the Standard Oil,^[18] the Nash,^[19] and the International Harvester^[20] cases, with a multitude of others.

The Lever Act is, therefore, in this respect, perfectly constitutional; for, though it names no "standard," there is a well established "standard" that the Common Law, for perhaps a thousand years, and the Supreme Court have, again and again, announced. Each owner, as well as each purchaser, has always had the right to fix the price at which he will sell or will buy, provided only that there is no restraint of competition, no unlawful monopoly or act. The Lever Act, therefore, is one of "the instances" of which the law "is full," and its "standard" is one of complete freedom, undisturbed by unlawful restraints or monopoly, and governed alone by the results of free competition and the resulting "market price." It is, therefore, as plain as the noonday sun that what is being asked is not at all that men be punished for violating a known defined "standard," of which they should have knowledge, but for adhering to it and continuing to obey the mandates again and again given to them by the Supreme Court itself. It cannot be conceived that there could be clearer statement of this than that so repeatedly made by the Supreme Court itself. Indeed, the decisions are but constant repetitions of the principle, not that men can be punished for undefined crime, but that the centuries old maxim: "Id certum est quad certum reddi potest." So that what is really happening is that the effort is being made to establish as complete a nonsequitor as can be well imagined.

Again, we have the "discovered" principle, so magnificantly stated in the Supreme Court's decision in the Monongahela case,^[21] where it was determined, (it already being established, that the time of taking is the time of fixing the value of property), that "just compensation" means, and can only mean "a full equivalent." And yet it has recently been argued that by confusing "value" with "price," matters can constitutionally be so manipulated as to deprive a man of his property by but giving him the means to replace but half of it, though the whole has been taken!

Again, there is the "discovered" principle underlying the Connolly case,^[22] but in an aspect not heretofore realized. Remembering the principles pointed out by Mr. Justice Holmes as to what constitutes "value," it is manifest that the unconstitutionality of this Act in this respect is not confined to the distinction between agriculturalists and all other classes. Of course, all should see that it cannot accord with natural justice to hold that the drover has no untrammeled rights of determining the value of his own food cattle, nor to be guided by the results of market price resulting from free competition, whilst a farmer has both, but that the defect extends much deeper. Let us suppose that two men have saved equal sums, and one has invested his savings in horses, whilst the other, in food cattle. The man owning the food cattle is, if current contentions are correct, deprived of both the guidance of the "market price" and his own free and untrammeled judgment, whilst the owner of the horses, should the cattle owner wish to buy of him, can not only fortify himself with both, but can even call upon the District Attorney to have the other fined and jailed for doing exactly the same thing. If this be so, of what avail the fifth Amendment?

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1. Henry Dunning MacLeod, "Elements of Economics," Book I, Chap. V, Sec. 3.
2. Day vs. Savage, Hob. 85-87.
3. I Inst. Epil.
4. Lord Chief Justice Holt, Ashby vs. White, 2 Ld. Reym.
5. Coke upon Littleton, 10 a.
6. Spalding vs. Vilas, 161 U. S. 483. 1896.
7. Barnardiston vs. Soame (1674), 6 How. St. Tr. 1096.
8. City of Knoxville vs. Knoxville Water Co., 212 U. S. 13. 1909.
9. International Harvester Company of America vs. Kentucky, 234 U. S. 216. 1914.
10. The Oklahoma Operating Co. vs. Love, 252 U. S. 331. 1920.
11. Ohio vs. Ben Avon Borough. Decided by the Supreme Court June 1, 1920. Not yet reported.
12. 1920 L. R., 3 K. B. 197.
13. International Harvester Company of America vs. Kentucky, 234 U. S. 216. 1914.
14. Nash vs. United States, 229 U. S. 373. 1913.
15. International Harvester Company of America vs. Kentucky, 234 U. S. 216. 1914.
16. U. S. vs. Sharp, Pet. C. C. 118.
17. U. S. vs. Brewer, 139 U. S. 278. 1891.
18. Standard Oil Company of New Jersey vs. United States, 221 U. S. 1. 1911.
19. Nash vs. United States, 229 U. S. 373. 1913.
20. International Harvester Company of America vs. Kentucky, 234 U. S. 216. 1914.
21. Monongahela Navigation Company vs. United States, 148 U. S. 312. 1893.
22. Connolly vs. Pipe Co., 184 U. S. 540. 1902.